It's a bloodbath out there at the moment and the bad news finally arrives at the door of the Pound..
| GBP
| Sterling is down across the board today and significantly against the majors over the last week. China's retaliation to US tariffs has escalated the trade war conflict and as expected global markets have been punished.
As mentioned last week, in times of turmoil/uncertainty, it's the safe-haven currencies that prevail. GBP has lost 3.8% versus CHF & 3% against JPY in the last 7-days. After being devalued itself, the USD has bounced back and claimed 1% on the Pound and now trades at a 1-month low.
But it's the £-€ pair that has caught the most attention in the market and as you would expect is the most traded for this readership. 2.3% has (out of nowhere) been lost in a week and is now trading at a 7-month low.
So why has the Pound fallen and what the hell happens next?
To answer the first question, GBP is not a safe-haven currency and whilst the currency has prevailed since Trump regained his presidency and talked tariffs, this is now a global emergency where no-one or nothing is safe and so investors flock to what they know is the safest option/s and that's not £.
One of those safe options is now the Euro. Expectations are that a trade deal will majorly lower the 20% import tariff and move it close to or even better the UK 10% tariff. Also, Germany's new position makes European stocks very attractive after being subdued for quite some time now.
To answer the second question, I have no idea unfortunately. I can see GBP bouncing back across the board eventually as the moves against it have been swift and deep (overbought territory). By when and where it leaves the Pound in terms of value against other currencies, I am very much on the fence for now.
Hedging with larger exchanges looks to be the only play I would be suggesting at this time.
EUR
The Euro looks to be in the driving seat and is trading like a safe-haven at the moment. But for how long, no-one knows. Those hopeful of securing £-€1.20 this summer should seriously consider a rethink, as that looks to be very far-fetched at this time.
Those that are selling their European properties and moving funds back to the UK all of a sudden are seeing the best rates in 7-months. A Forward Contract would be very useful here to bank the quick profit.
USD
News just in, Trump is supposedly considering a 90-day pause on tariffs (apart from China) in response to global markets. This is so countries can try to renegotiate deals with the US or risk major economic uncertainty.
This is 'good news' and would very much calm the waters, but volatility will still be heightened as this is the environment that Trump created last time and likes to 'play' in. |
|
Twitter
Facebook
linkedin
Google
